Income Comparison and Happiness within Households

Abstract

This paper applies the German Socio-Economic Panel to analyse the effect of within household income comparison on individual life satisfaction. Our estimates indicate, a primary breadwinner wife decreases spousal individual happiness by roughly nine per cent. To state the economic significance, a €70,000 increase in external, peer reference income corresponds to a similar individual happiness decrease. The estimates suggest envy effects among couples and provide mixed evidence for gender roles to influence subjective well-being. Based on subsample estimations, our results are driven by younger birth year quartiles, lower education and total income households, East German couples and households with greater fulltime employment share. The paper adds to within household interdependence of subjective well-being and indicates negative consequences of couple income comparison for individual happiness. Wives (barely) outearning their husbands seem to signal ’competition’.